Nevada Copper on the brink of bankruptcy.
Base metals miner Nevada Copper has announced a C$97-million bought-deal raising, without which the company is in “serious financial difficulty”, owing to the lack of available cash and funding resources.
The TSX-listed firm announced on Monday that it had entered into an agreement with Scotiabank, on behalf of a syndicate of underwriters including RBC Capital Markets and National Bank Financial, acting together with Scotiabank as joint bookrunners, and including Haywood Securities, pursuant to which the underwriters had agreed to buy on a bought deal basis 643 713 553 units of the company at C$0.15 each.
A unit consists of one common share of Nevada Copper and one-half of a common share purchase warrant. Each full warrant will entitle the holder to purchase one common share at C$0.20 a share, for a period of 18 months following the closing of the offering.
The company has also granted underwriters an over-allotment option, which could raise an additional C$3.6-million.
Nevada Copper also announced that it would apply to the TSX for a “financial hardship” exemption from the requirements to obtain shareholder approval of the offering, on the basis that without the offering, it would be in financial difficulty.
The offering is designed to improve the company’s financial situation. The net would be used to fund operations, including to continue its previously-announced accelerated mine development plan and to restart and ramp up production from its Pumpkin Hollow underground mine, in Nevada, US.
Concentrate production is temporarily suspended at the underground project, owing to Covid-19 impacts and the company said it expected to restart the mill in August.
As part of the offering, Nevada Copper would prepay in full the existing $30-million convertible loan facility that the company entered into with its largest shareholder, Pala Investments.
The convertible loan was entered into as part of the company’s balance street strengthening package that was completed in March. Subsequently, Pala syndicated a portion of the convertible loan, including an aggregate principal amount of $13.4-million to an affiliate of Castlelake, the company’s second largest shareholder.
Pala and Castlelake have agreed to waive the applicable prepayment premiums and have agreed to subscribe for an aggregate of 302 977 529 units for gross proceeds of about C$45.4-million pursuant to the offering. In addition, Pala and Castlelake had committed to subscribe for up to an additional 163 128 000 units pursuant to the offering for about C$24.5-million of gross proceeds in the aggregate.